Standard 3: Accurate and cost-efficient proposal budgeting.

Develop an accurate and cost-efficient proposal budget including a budget narrative based on project activities and timeline, and in accordance with CRS policies and donor requirements.

Develop a detailed budget and budget narrative in line with the project activities schedule and staffing plan, and adjust as needed.

Why
The proposal development team starts preparing the detailed budget and budget narrative early in the design process in parallel with initial activities scheduling and development of the project staffing plan. This early budget helps refine the project financial picture, providing clearer parameters for programming and staffing decisions following initial “back of the envelope” estimates and preliminary budget calculations. Refining this early budget to create a final detailed budget and budget narrative:
- Ensures adequate and reasonable budgeting for all activities proposed.
- Enables accurate analysis of program to administration costs as well as other financial issues that CRS and donors must consider.

Who
- Primary responsible: Proposal budget lead
  - The proposal budget lead is responsible for preparing the detailed budget and budget narrative.
- Others involved: Proposal coordinator; other proposal development team members (e.g., technical, MEAL, and human resources leads); finance manager (FM), if not the budget lead; head of operations (HoOps); country representative (CR) and senior management team (SMT); partner budget lead(s); proposal decision-maker; regional finance officer (RFO); IDEA staff.
  - The proposal coordinator assists with ensuring the budget development process is coordinated with other project design and proposal development steps;
  - Proposal development team members, particularly the technical lead, human resources lead, MEAL lead, and supply chain and ICT staff provide budget inputs for their areas of expertise;
  - The FM and HoOps provide shared cost and unit cost information;
  - Each partner budget lead provides partner budget inputs;
  - The proposal decision-maker approves the budget and budget narrative;
  - The RFO and IDEA staff provide advice as necessary, including related to any budgets developed for contract funding mechanisms.
Budget development roles in different proposal scenarios: Roles for budget (a.k.a. “cost application”) development vary by the nature of the opportunity. For larger proposals with complex budgets and budget narratives, it may facilitate the process to identify a budget narrative writer in addition to the budget lead, as the two tasks often require different skill sets. For multi-country or headquarters-led proposal development processes, there may be an overall budget lead plus country-level budget leads; the overall proposal coordinator ensures the country program budget lead is linked to counterparts in other countries and the overall proposal budget lead.

When
- According to the proposal development timeline; finalize by deadline in the timeline.

How
This key action is dependent on prior identification of the proposal development team (see Standard 1, key action 1) and development of a proposal development timeline (see Standard 1, key action 4). It is guided by the following ProPack I “standard of quality”:
- Technical and finance staff and stakeholders work in tandem on the activities schedule and budget drafts.
Follow these steps to develop and update a detailed project budget and budget narrative:
1. The budget lead, working with the proposal coordinator, clarifies CRS and any donor parameters for budget development. To do so, the budget lead:
- Reviews CRS’ Cost Guidance, Cost Application Guidance, and DIP-to-BudgetNote that although “DIP-to-Budget” is the name commonly used for this tool, given that an activities schedule rather than a DIP is developed a project design stage, a more accurate name would be “Activities Schedule-to-Budget”. tools and adapts the DIP-to-Budget tool as needed.
- Refers to the overall proposal development timeline to develop a timetable for the development of the budget, starting early in the design stage and building in sufficient time for review.
- With support from the FM as needed, compiles, reviews and analyzes budget and expenditure information from similar projects. This preparatory work is particularly important when developing the budget for an entirely new project; for follow-on, replication, or expansion projects, start from the most updated version of the project budget and factor in any lessons learned. Compiling and reviewing this information also helps identify more accurate and realistic costs and allocation of projected expenditure across project years.
For externally funded opportunities, in addition to the above, the budget lead:
- Reviews the donor call for proposals.
- Identifies the appropriate budget template per donor specifications, as well as any tips for budgeting for the donor (consult with the FM, RFO, or IDEA staff as needed).
- Reviews analysis around the donor’s requirements for budgeting as documented in the Donor Reality Checklist.
- Identifies major budget categories as specified by the donor and determines how best to align these with CRS’ cost structure and account codes.
- Works with the proposal coordinator to define how the proposal development team will work with partners on budget development, keeping in mind partner capacity and other considerations, as well as who from the proposal development team will lead communicationThis may be the proposal coordinator, budget lead, technical lead, or even a partner liaison (a proposal development team role sometimes included in processes with numerous and/or complex partnerships). with partners around budget development and finalization.
Budget development is more than managing budget formulas: The role of the budget lead involves more than compiling budget figures. The budget lead must have a sufficient understanding of the project design to be able to ask the right questions during budget development. Good practice is for the budget lead (and budget narrative writer, if applicable) to attend initial project design meetings about the project’s objectives and likely activities. With an understanding of what the project is about, the budget lead can work more effectively with other proposal development team leads to clarify and refine costs, leading to a more accurate, realistic budget and a coherent budget narrative.
1. The budget lead refines the preliminary budget calculations by working with the proposal development teamBudget refinement/development of the first full budget draft is often done in a joint budget/activities schedule development workshop (see ProPack I, p. 121). to identify activity cost driversCost drivers are the factors or units that most greatly affect the cost of your activities, and which drive changes in cost when activity volume changes. These apply to both variable and semi‑variable costs, and there can be more than one cost driver for each activity cost. and to refine project staffing estimates based on the staffing requirements flowing from the activities schedule and reflected in the initial project staffing plan.
- Click here to view the Steps in the refinement process
  Work with the proposal technical lead and any sector leads (including MEAL staff for MEAL budget itemsSee MPP 4.1: Budget for quality MEAL activities and sufficient staffing for MEAL.
  
  Allocate 8 to 10 percent of the total project budget to MEAL staffing and activities, including baseline and evaluation costs. ) for information around specific costs for anticipated programming activities.
  
  Work with the HoOps and FM to establish cost drivers and valuation methods, especially for what is planned as an In-kind project contribution. The Cost Share Examples Tools document provides accepted ways to document and validate In-kind cost share.
  
  Engage other finance and operations staff as needed to determine unit costs and calculate total costs.
  
  Review the early start-up planning template and list of Project Start-up Key Meetings and Events to ensure the project budget allocates sufficient funding for early start-up activities.
  
  Be sure to budget costs associated with staff recruitment (see Standard 4, key actions 2 and 3), any start-up surge staffing, as well as financial start-up activities such as assessing sub-recipient capacity and supporting partners with project financial set-up (see Standard 8, key actions 2 and 6).
  
  Use the Guidance on Budgeting and Charging Technical Assistance in Projects and Proposals to estimate costs associated with support from CRS technical advisors.
  
  Include funding to develop and implement project-specific capacity strengthening plans (Standard 6, key action 4) for CRS and partners.
  
  Include costs associated with items in the project procurement plan as well as other supply chain management activities.
  
  Link budget formulas to cost drivers where possible, to update calculations automatically as activities change.
  
  Ensure that indirect cost recovery (ICR) is budgeted appropriately.
  
  As applicable, confirm that the proposal coordinator and CR have initiated the process to obtain required regional and headquarters approvals for the budget (e.g. approval for cost share per the Planning and Managing Cost Share policy, or any exceptions to CRS indirect cost recovery policy) – see also Standard 3, key action 1 (steps 2 and 6).
Multiple countries; single, coherent budget: For multi-country projects, consider developing budget guidance (e.g. simple budgeting tables) detailing the major components of all activities that will take place in more than one country, along with budgeting instructions (how to budget the frequency and number of units for an activity; unit costs if standardized, etc.). Agree early in the budgeting process on locations as well as modes and costs of transportation for planning and coordination meetings, as well as technical assistance visits and monitoring support between/across countries. Determine under which budget(s) to capture such costs. Share individual country program information about budget issues (such as past project budgets and expenditures). If one country program has more experience implementing the proposed project activities, ensure staff from that country program work closely with the budget lead(s) from the other country program(s) to help with realistic budgeting.
1. The budget lead requests the FM’s and/or HoOps’ support in calculating the project support pools (office space, vehicle use, etc.), or refining preliminary calculations for the same, and ensuring budget planning reflects the implications of management and staffing plan decisions.
- Ensure budget calculations allow for competitive salaries, including merit increases, both for project-specific staff and staff in the cost allocation pools.
- During budget refinement, adjust to reflect planned staffing patterns over the life of the project (e.g. some positions may phase in later than month one, or phase out early in the final quarter of the project as field activities wind down in preparation for close-out).
1. The budget lead meets with the partner budget lead(s) to further refine and complete partner budgets, or support partners to develop their budgets (if not developed under Step 2 above) – for guidance, see Standard 3, key action 4.
- The CRS technical lead, partner technical lead and budget narrative writer (if applicable) should join budget development/review and refinement sessions with partners to ensure all programming details are appropriately incorporated in partner budgets and reflected in the budget narrative.
1. The budget lead reviews and consolidates all draft CRS and partner budget information in the budget template.
Budget development is an iterative process: Plans for project activities, activity timing, staffing levels, specific project location(s), and even scope may change during proposal development and review. A key role of the proposal coordinator is to work with the budget lead to ensure the budget is regularly updated to reflect these changes.
1. The budget lead (or budget narrative writer, if part of the proposal team) finalizes the accompanying budget notes/narrative.
- Pay special attention to consistency between the budget and budget narrative, especially when there have been many changes to the budget.
- For proposals developed for external funding, use the budget narrative to emphasize CRS’ value for money and cost-effectiveness.
1. The proposal decision-maker (or, for discretionary-funded projects, the CR) reviews the draft budget and narrative to confirm compliance with donor regulations and CRS policy.
2. The proposal coordinator arranges for review of the budget and budget narrativeReview project budgets and budget narratives along with key components of the project technical application. Reviewers from both finance and programming perspectives should ensure the budget and budget narrative: (1 - Programming) reflects CRS sector technical guidance and industry standards and are consistent with project sustainability and exit strategies; (2 - Both finance and programming) are cost-efficient (i.e., leverage efforts and build on synergies with existing or past projects and initiatives, align with national strategies, do not duplicate staff between CRS and partners); (3 - Both finance and programming, for external funding opportunities) are competitive by responding to donor preferences/requirements. in accordance with regional guidance (consult your regional review guidelines and Standard 2, key action 4).
3. Following the review, the budget lead addresses the review feedback, with support from the FM and proposal team members if necessary.
4. The budget lead shares the final budget and budget narrative with the proposal coordinator who:
- Verifies the country program has obtained any necessary regional and headquarters approvals for the budget (e.g. any exceptions to CRS indirect cost recovery policy).
- Ensures the budget and budget narrative are integrated with the other elements of the final proposal package (in coordination with the editor/packager if part of the proposal development team).
- (For external funding opportunities) Arranges for submission to the donor.

Partnership
- See Standard 3, key action 4 for detailed guidance on working with partners to develop project budgets.
When CRS is a sub-recipient
- After negotiating CRS’ budget parameters and ceiling and obtaining other necessary budgeting guidance from the prime, follow the same process to develop and finalize CRS’ sub-recipient budget.
Emergency projects
- Follow the same process for emergency projects.
- Keep in mind that budgets for emergency projects may need to factor in high staff turnover, emergency staffing benefits and frequent use of TDY staff for implementation.
- The Emerency Field Operations Manual (EFOM) does not include guidance on budgeting for emergency proposals, but recommends that the budget lead should seek support from the country program or regional office leading the response.
- The EFOM does include information about facilities, equipment and vehicles (see the Administrative Systems section) as well as Indirect Cost Recovery (see the Finance section), which may help with budget development.
- If you are working on a large-scale emergency where several Caritas Internationalis (CI) Members are responding and/or supporting a response of the national Caritas, please refer to the Protocol for CI Coordination in Emergency Response, Emergency Framework and Toolkit for Emergency Response documents on the CI Baobab website. These documents provide guidance on coordination and the process of developing, implementing, monitoring and reporting on an Emergency Appeal for funding via the CI Network. If you are not registered on the CI Baobab site, please register here.When registering for the CI Baobab site, CRS staff should select "Caritas United States - CRS" as their organization and list the Humanitarian Response Department and [email protected] as the reference contact. If you have any questions, please contact CRS’ Humanitarian Response Department ([email protected]).

Standard 3: Accurate and cost-efficient proposal budgeting.

Key resources

Tools and templates

Policies and procedures

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